Presented to the Political Science Department

De La Salle University - Manila

1st Term, A.Y. 2020-2021

In Partial Fulfillment of the Course

Introduction to Political Economy (A51)

Playing the Market, Playing the People: The Implications of Oligopolies in

Political Economy and the Philippines

Submitted by:
DIZON, Jeremiah Riko S. (11831111)
LAZIER, Heather Mae C. (11829648)
MANABAT, John Arzil E. (11825669)

Submitted to:
Dr. Eric Vincent C. Batalla

February 5, 2021
 I. Introduction

Definition and Characteristics of Oligopoly

In general sense, an oligopoly describes a market structure that is highly

concentrated and shared among a few companies. There is a limited group of “players”
and competition that happens among their products and services. To further expound,
Richard Barton (1968) claims that an oligopoly contains few sellers to the point that their
actions influence and impinge upon the effectiveness of the market and the other
sellers. These “markets” are places or situations where a trade of services and goods
occur. For Stanbury and Reschenthaler (1977), oligopolies, as a kind of market, have
the tendency to interact with the behavior of firms and industries situated within. Large
companies and businesses, who sell relatively the same products or services, will likely
sell it within the same set of prices although reflecting small differences in the quality
provided. Although noticeable deviations, these firms will not attempt to charge
significantly more than the established market price that has been agreed upon. The
authors also portray that the awareness of oligopolistic companies will limit competition
and lead to identical price variations. What one firm does affects the other firms present.

As for the characteristics of an oligopoly, it definitely has its distinctive image as a

form of market structure in an economy. Interdependence means that with an exact
number of firms selling and producing that that affects the total output, they rely on each
other when it comes to the decision-making process. This process includes discussions
about the standard price, products to sell, and how to manage their intricate rivalries.
They also usually remain vigilant among each other so as not to be taken advantage of.
Competition, meanwhile, suggests that a few firms have a highly concentrated and
focused nature of constant competition and struggle. Barriers to entry is one of the
important factors under an oligopoly. Patents, licenses, or laws that regulate crucial raw
materials dictate whether a firm can enter or leave an oligopolistic market. The
existence of price rigidity makes each company keen on sticking to the set price.
Whether reducing or increasing prices, companies make sure to act or react to each
other to maintain the fixed standard. An indeterminateness of the demand curve is a
result of their interdependence (Kumar n.d.). Furthermore, firms can either produce
homogeneous or heterogeneous products. The former indicates that it is a pure or
perfect oligopoly wherein industrial products such as aluminum, oil, and steel are
commonly found. On the other hand, the latter shows that a differentiated oligopoly
produces common goods like automobiles, televisions, and detergents (Business
Jargons n.d.).

Potential Implication on Economic Development

As a possible persisting problem in the Political Economic landscape, oligopolies

that have a high status of concentration can either lead to a possible decline or increase
in competition. Economists suggest that it creates a rift between resource allocation and
consumer welfare. Faced with a limited number of choices, consumers usually take into
account what is available to them given that only a few number of firms are in play.

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Within and across industries, established businesses and companies have already had
a similar portfolio. They each now aggressively compete with each other, which drives
out smaller firms. Thus, these firms continuously switch up their products or services
that makes it more or less “similar”. This causes significant inefficiencies that do not
cycle back to the consumers (Schechter 2019). Oligopolies obviously make the owners
on top become richer. However, given that condition, economic or financial growth in
overall living standards for most ordinary people puts downward. Some of its negative
implications are unemployment, allocation of capital, and distribution of interest rates
(Bond 2020).

Oligopoly as a Source of Market Failure

Oligopolies in the sphere of market failure cause imperfections in the processes

of a market. The presence of an oligopoly may distort the market’s “invisible hand” to
allocate resources efficiently and effectively. It contains factors that can prevent the
broader competition and further development in a market (Jackson and Jabbie 2019.
pp.2-5).

Market failure does not explicitly mean that a market is absent in an economy.
Rather it is when a market does not work effectively and properly. It happens when
private markets come short in providing services and goods at all or at the most at
optimal level. More often than not, a market fails due to the downslide of institutional
arrangements that support the market. Because of the inefficient allocation of resources
and setting of prices, market failure reflects the growth of an economy in a negative
manner (Cunningham 2011, pp.13-26). As for the implications of market failure, there
are a number of factors that contribute to it. Externalities occur when the market deals
poorly with the incidental side effects of economic activities. Allocation of resources that
are divided between the present and the future depending on the costs and benefits
available (Baumol and Blinder 2010, pp.287-299). In addition, demand-side market
failure happens when demand curves do not reflect consumers' full willingness to pay
for a good or service. Information failure is when buyers or sellers have incomplete or
inaccurate information and their cost of gathering better information is prohibitive.
Lastly, macroeconomic instability is when periodic downswings in economic activity
result in unemployment and falling incomes (McConnel, Brue, and Flynn 2017, pp.1-10).

Market failure has the potential to trickle into government failure. Government
failure describes the economically inefficient outcomes caused by shortcomings in the
public sector. When a government intervention causes a more inefficient allocation than
would occur without the intervention, a government failure has taken place. Vote-
seeking politicians have the tendency to ignore economic rationality by failing to
objectively weigh costs and benefits when selecting programs. The contrast lies mainly
on programs that have immediate and clear-cut benefits with deferred costs against
identifiable costs with less measurable yet long-term benefits. Thus, it influences the
selection of economically justifiable programs that could have been better for the market
(McConnel, Brue, and Flynn 2017, pp.103-111). Meanwhile, certain attributes that build
up government failure are deemed to have the heaviest influences. Legislative failure
reveals the intent of vote-maximizing politicians to appease special interest groups

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through 'pork barrel'. This bias leads to the excessive provision of public goods.
Bureaucratic failure sees to it that bureaucrats sought to maximize the size of their
budgets. By doing so, they engage in oversupplying output and inefficiently supplying
output or both. These first two components focus more on agency failure. This arises
because agents lack the incentives to act in their principal's interest. Lastly, rent-seeking
happens when citizens, as wealth maximizers, aim to use government intervention to
create economic rents for themselves (Wallis and Dollery 1999, pp.40-59).

Objectives

The following are the main objectives of the group in presenting this analytical paper:

○ To determine the political and economic implications of Oligopolies on key

areas of public interest
○ To illustrate the strategies of an oligopolist and lay out its corresponding
action through a pay-off matrix
○ To identify patterns of relationship between Oligopolies and Patrimonial
Oligarchy

II. Analysis

Studies on Oligopolies’ Effect on Development

As oligopolies are included as one of the sources of market failure by Dollery and
Wallis, it is only fitting to further examine the extent of its implications on key areas of
public interest such as development, freedom, and economic growth. Rosenberg and
O’Halloran (2014, p. 240) stated that oligopolies occupy the market with significant
power such that it concentrates market power and control among a small number of
firms that produce most of the market’s output. In this light, it can be supplemented by a
recent study of Kumar and Stauvermann (2020, pp. 17-23) that tackled the income and
wealth inequality brought by the concentration of market power, or in this case, capital
accumulation that is caused by oligopolies. The authors found out that while the
association between growth and market concentration is not unique, the more
competition there is on the market, the higher the labor income will be, but a
consideration must be made in looking at the profit reduction of firms because the
increase in income is less than the reduction of the profits. Another point of discussion
that they found out is, as the capital accumulation increases because of the imperfect
competition, its positive externalities will act up and bring more inefficiencies. The more
concentrated the market, the lower is the savings and interest rates. This goes to show
that in the pursuit of profit maximization, there will be a greater gap in income
distribution that will be at the expense of the labor force. The study concluded by stating
that the political power of oligopolists must be reduced at all means because as they
employ schemes of corruption through lobbying and bribes, it will further damage the
market and society. An alternative to increase competition that will abolish corruption

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should be taken into account because it can lower income inequality and enhance
economic growth.

In another work regarding oligopolies’ power and control of the market economy
and freedom by Machlup (1967, pp. 263-265), the author stated that when oligopolies
have grown that it reached a size associated with large measure of control over the
industry, its exercise of control is auxiliary to its growth. While this influence over the
market may not necessarily be equated with a motive to deteriorate the competitive
market system for its own gains, society should keep notice of its proclivity in seeking
more influence over the market. They may do this by organizing competing suppliers
into cartels and by persuading the government to pressure suppliers to conform and
abide by rules and regulations that reduce competition. This is one of the strategies of
an oligopolist that will be discussed further in this paper. Furthermore, Machlup also
touched on the philosophy that market economy is anchored on liberalism. The author
discussed the excessive impersonal power that steers the system that no one person or
group could be blamed for any drastic changes in wages, prices, and employment
because the belief is that economic power is widely dispersed in a market economy, but
such irony is present in the form of power concentration. The article ended by stating
that oligopolies which give a few persons influence over prices, wages, incomes, and
supplies, this may potentially affect many people that would invite mass antagonism
against the system that enables it, thereby proceeding to the whittling away of economic
freedoms that should be espoused through good governance. As the exercise of power
impinges economic freedom, the author concluded by recommending realistic and
unambitious policy actions that will kickstart an effort to prevent the growth and
proliferation of oligopolies.

Lastly, Aghion and Schankerman (2004, pp. 1-25) offered a different view by
citing the benefits of a market that is not too concentrated and is abundant of
competition. The authors studied the effect of competition-enhancing policies on political
economy and they found out that: first, it significantly reduced the market share of less
efficient firms. This means that those firms who produced goods and services that are
subpar, the said policies weed out firms which provide less and stimulate the entry of
those which give more vibrance to the competition in the market. As firms strive to
produce efficiency in terms of productivity and quality in their goods and services, the
people will have more options to choose from which would not force them to settle for
less. Second, it increases the incentives of firms to reduce costs that would not allow it
to fall into a low-competition trap. Such a trap mostly involves the bribing of politicians
by high-cost firms to prevent competition. These happen particularly in economies
where the degree of competition is relatively low. Lastly, it stimulates entry of new low-
cost firms that would contribute to economic growth however small it is. With the entry
of new firms, this gives the people more options and more opportunities for employment
and investments. With the presence of market concentration in the form of monopolies
and oligopolies, the first benefit would not happen as market shares are condensed on
a small number of firms. Goods and services that are offered at a limited supply will be
equivalent to a non-option for the people, however substandard those may be. Second,
oligopolies having high costs, will have the opportunity to bribe politicians to limit
competition through government laws, potentially having a state and regulatory capture.

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Lastly, the presence of oligopolies is tantamount to a large barrier to entry, which means
that it will be hard for new firms to enter the industry that would potentially increase
efficiency, productivity, and quality standards.

The Strategy and Politics behind Oligopolies

Since oligopolies control a significant portion of the market, concentrating power

and wealth on a small number of individuals or firms, there must be a strategy employed
in order to amass the said power. Shapiro (1989, pp. 363-375) included in his chapter
the different theories of oligopoly behavior and in one of its parts, the author highlighted
the tacit collusion between oligopolies to support any Pareto optimal outcome. Following
Friedman’s equilibrium, it involves the strategy for the market participants to produce its
share of collusive output in a given period, as long as other players continue to do so as
well. However, if a player produces more than the tacit arrangement, this defection is
considered as a collapse of collusion, signalling a “cheating” on the part of the
overproducer or the overpricer or its opposites. Furthermore, theoretical grounds
suggest that oligopolistic behavior gravitates toward competitiveness and the politics of
powerplay such that aside from the chess game in terms of production, there is also a
price war that intends to maximize respective oligopolies’ outputs and revenues.

From the work cited above and the lecture of Clifford and Hill (2016), it can be
further extrapolated through the strategies of oligopolists and put in a pay-off matrix to
further illustrate each strategy and its corresponding outcomes. We know that it is a fact
that the oligopoly market system is dominated by large corporate firms, they play these
unscrupulous strategies to survive the competition against other large firms: Mutual
Interdependence, a strategy wherein their pricing tactics or production scheme will
take into account the actions of the other firms and possibly depend on it avoid critical
competition. When the other firm either raises or lowers their price or production of the
product, they will also follow the line of price; Collusion, wherein firms will have an a
tacit arrangement towards the price or production of their products, so as they will be
both patronized by consumers, but this strategy has a flaw which is; Cheating where
either of the firms can violate their agreement. When two firms collusively agreed to
raise their price or rate of production but the other firm defrauded and altered its part of
the deal, the consumer will more likely patronize the firm with lower price and; Strategic
behavior where firms use non price competition in order to gain a significant control of
the market through various means such as marketing and advertisements to endorse
their products. The politics of interdependence plays such an important role in the
movements of oligopolies, complementing this is the maneuverings of each market
player to gain the optimal outcome in the game.

Game Theory and Prisoner’s Dilemma as Applied to Oligopolies

As oligopolists are referred to as ‘players’ in the market, a fitting theory to use in

this matter is game theory which helps us understand situations in which decision-
makers interact. As it is a game for market players in a general sense, it is considered a
competitive activity in which these oligopolists contend based on a set of rules. To
further apply it, oligopoly follows game theory in which it is commonly used in

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economics to illustrate interdependent decision-making among oligopolistic firms. It
demonstrates that one firm makes a decision based on the decision expected from the
other firm. One key conclusion from the game theory analysis is that firms often make
decisions that are "second best" or the "lesser of two evils”. A classic example of a
game theory is the prisoner’s dilemma that puts two prisoners at a predicament of
facing more or less jail time that will largely depend on whether they cooperate or defect
but it is impossible to determine as both decisions are made without the knowledge of
the other. But it does apply the concept of pareto optimality where no one individual can
be better off without making at least one individual worse off (Mock 2011).

To illustrate it hypothetically using a pay-off matrix, the group will set an example
out of oil companies in the Philippines (which may not accurately represent real-time
variables and is only used for illustrative purposes). Suppose that Petron and Shell, two
of the leading oil companies in the Philippines are now planning for their next general
plan of action for the year 2021 with the goal of increasing their market shares,
respectively. It is given that a standard profit of 100 Million will be gained by each
company unless one of them employs a tactic of non-price competition which is
strategic behavior and decides to advertise. If both of them would agree not to
advertise, then they would get the standard average yearly earnings of 100 Million, but if
one of them decides to use advertisements which would cost them 20 Million, one
would get an additional 40% increase in profit, but if both of them decides to use
advertisements, an additional 25 % would be gained and it is stipulated in the normal
form of the game as follows:

SHELL

Advertise Not to advertise

Advertise (105,105) (120,60)

PETRON Not to advertise (60, 120) (100, 100)

From this pay-off matrix between two oil companies, the standard action of the two
companies is to form a tacit collusion wherein they will have an arrangement of not to
advertise so as retaining the standard profit of 100 Million, the area of interdependence
by collusion is as follows:

SHELL

Advertise Not to advertise

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 Advertise (105,105) (120,60)
PETRON
Not to advertise (60, 120) (100, 100)

In this kind of deceitful agreement, it is accompanied by a flaw since it is not to be

regarded as formal because of its secrecy and . It is as if there was no agreement
because of the non-binding powers of a collusive agreement. The flaw of collusion is the
strategy of cheating which obviously violates their secret arrangement by defrauding
and letting the other company with the ‘worse-off’ opportunity cost. The area of
cheating in collusion is as follows:

SHELL

Advertise Not to advertise

Advertise (105,105) (120,60)

PETRON Not to advertise (60, 120) (100, 100)

In all of the strategies, the most complicated is the mutual interdependence anchored
on the Nash equilibrium, where the strategy of each player is to evaluate the strategies
of their competitors and decide that they gain no advantage by deviating from their initial
plan of action (Ohlin 2012). This is because this is the decision of a firm where it can
best respond to the given circumstances. Following the rule on the Nash Equilibrium
where it entails a stable state of a system involving the interaction of different
participants, in which no participant can gain by a unilateral change of strategy if the
strategies of the others remain unchanged. In this case the two companies would
strategically and patiently wait for the rival firm’s actions. It elicits rigorous and critical
decision-making without having to be the ‘worse off’ and not without gaining at least a
little percentage over that of the profit in collusion.

The area of mutual interdependence is always the pay-off where the Nash equilibrium
is found:

SHELL

Advertise Not to advertise

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 PETRON Advertise (105,105) (120,60)

Not to advertise (60, 120) (100, 100)

Oligopolies in the Philippines and its Effects on the Economy

Contextualizing oligopolies in the Philippine setting, there are certain cases that
have been surfacing especially with the emergence of Dennis Uy. Uy is mainly the
reason why the DITO Telecommunity was able to enter the Philippine economy, which
has become a third actor in the industry of telecommunication. It has led to it becoming
a major oligopoly after being granted an outstanding 25-year franchise by the House of
Representatives. As for Uy’s role, his Davao-based business, namely Udenna
Corporation and Chealsea Logistics in partnership with China Telecom, linked up with
DITO in order to challenge the prevailing networks, Globe Telecom PLDT Inc. (ABS-
CBN News 2020). Despite the impression of DITO acting as a new challenge to the
existing duopoly, it still poses a threat not only to our economy because of another
powerful industry contributing to market failures but to our national security as well
because it is backed by the Chinese government despite the heavy economic
restrictions (Venzon 2020). Since oligopolistic markets are deemed to be consisting of a
high degree of price and output rigidity, this leads to an interdependence among
involved firms with regards to price and production (Rosenberg and O’Halloran 2014,
pp. 239-241). For example, gasoline companies in the Philippines remain vigilant with
each other when it comes to implementing and announcing prices. Currently, the
Philippines ranks low on the gasoline affordability index, placing at 84 out of 108
economies analyzed by a United States-based research institute (Domingo 2020). To
further illustrate, known gasoline companies, such as Chevron, Seaoil, and Shell, hiked
prices at the same time at the first quarter of the month. Also, these adjustments in the
prices are usually effective at a certain time and implemented altogether. Price changes
range from a few Philippine centavos and pesos (Crismundo 2021).

The Duterte administration produces and gives attention to the concept of

oligarchy, which goes against his narrative of anti-elitism. President Duterte since his
presidency began, expresses no love lost between his agenda and the desires of the
oligarchy to maximize their hold of the Philippine economy. Nathan Quimpo (2005),
citing the work of Paul Hutchcroft based on Max Weber’s concept, claims that
patrimonial oligarchy appears to have a mutual ground with ‘booty capitalism’ which
explains the laggard economy of the nation. With the structure of the country’s political
economy and the environment of its political system, the oligarchs have taken
advantage of it to engage in malpractices and mishaps that risk developmental policy
objectives and state regulations. Quimpo characterizes the capitalist system prevailing
in the Philippines as rent capitalism in which "a powerful oligarchic business class
extracts privilege from a largely incoherent bureaucracy". The problem of patrimonialism
and oligarchy have since then been attributed to the major developmental bog

8
experienced by the country. Both result in leverage of some elite families on the market
to advance their own private interests. Despite the heavy economic restrictions in the
country and the anti-elitism narrative of the President, patrimonialism and personalistic
politics still overrides the former. An irony in political economy flourishes because the
economic restrictions that should be protected by law should be insulated from the
politics of patrimonialism. As Budd (2012) stated in his work that patrimonialism is
where practically everything is dependent upon personal considerations, the economic
elites can use this kind of personalistic tie in the form connections, favors, promises,
and privileges to circumvent the legal constraints in the practice of doing business.
Thus, the relationship between oligopolies and patrimonial oligarchy is mutually
beneficial as patrimonialism gives fuel to the strategies of oligopolists and oligopolies in
turn fuel the culture of patrimonialism.

On the recent issues involving President Duterte when he claimed victory over
the oligarchy that has been controlling the economy and the people, it is quite clear that
it is bereft of any substance and credence as there are still many oligarchs and
oligopolies which continue to leech on the economy. While the Chief Executive
endeavored to break the status quo, he just exacerbated it through his populist rhetoric
by making his own brand of crony capitalism. This is evident in his actions of going
against or supporting officials and businessmen both within and outside of the
boundaries of the politician arena. As an example, the President’s selective hatred of
the elites such as Roberto Ongpin, where he berated the former trade minister because
he makes fortunes at the expense of the poor (Ranada, 2016) , cannot be said about
his close ally, Dennis Uy. As mentioned above, the quick, massive, and continuous rise
of the Davao-based businessman has not yet earned the ire of the President and he is
also yet to be put in the same position as the ‘oligarchs that control the economy and
Filipinos.

Curing the Government-induced Market Failure

When markets fail, government intervention may potentially alleviate problems.

Although numerous factors can account for such failure, there are also multitudes of
ways to overcome the issue. Economists have varying opinions about measures that
can be taken in order to correct them. For some, the economic ailment can be
addressed through the intervention of the government. State interventionism means that
the government plays an important role in the economy. In particular, it highly favors
intervention by the state in the market as a solution to its failures. As such, the state
engages in various interventionist activities to promote the welfare of its citizens. In
effect, it recognizes that government action can propel necessary changes that can
revive the economy. John Maynard Keynes, a British economist, argued that market
crashes can be reversed if the government becomes more involved. Through monetary
and fiscal policies, the state can stimulate the economy in order to prevent more
damages (Keynes 1936). According to his proposal, a stabilization policy would have
three goals in which there would be increased government spending, lower taxes, and
reduced interest rates during recessions. Government stimulus would boost aggregate
output and thus generate more income. Keynesian economics would dominate for

9
decades. However, other economists would later criticize his ideals by pointing out that
it is actually less effective than suggested.

Ineffective interventionist policies contributed to the eventual decline of

Keynesian economics. As a result, there was a renewed wariness towards government
involvement. This failure then led to the revival of free market and capitalist states to
foster economic growth. The implication of such is that unrestrained interventionist
policies could result in government failure. Nonetheless, it must be recognized that no
system is flawless. Inherent problems could lead to massive repercussions if it is not
addressed. In effect, it is not accurate to say that interventionist policies have no place
in the economy. Based on Wallis and Dollery (1999), market failure could indeed be
resolved by state intervention. However, it should also be acknowledged that when both
markets and government fail, there must be a contingency plan. Be that as it may, the
point is that intervention could still be an effective remedy. Recognizing the weaknesses
of institutions such as the state can actually be its strength. For Aikins (2009), it is
necessary for both the market system and state intervention to mutually coexist for the
general welfare of the society. As a major economic actor, the role that the government
plays is unparalleled. It has the means to be able to put forward policies that would
guard against excesses. Thus, it is not only logical but also reasonable to actually
recommend public policy based reforms as a cure to economic ailments.

III. Conclusion

Summary

The implications of oligopolies on Philippine development covers a large area. As

mentioned by Rosenberg and O’Halloran (2014) as well as Kumar and Stauvermann
(2020), the concentration of market power in the country is occupied by oligopolies. As
a result, this damage to the market and society introduces a massive income and
wealth gap between social classes. Furthermore, Machlup (1967) stated that the
exercise of control by oligopolies is auxiliary to its growth. In an attempt to reduce
competition, they may seek substantial influence over the market by pressuring the
government and suppliers to conform and abide by a set of rules and regulations. On
the other hand, Aghion and Schankerman (2004) found that competition-enhancing
policies significantly reduces the market share of less efficient firms, increases the
incentives of firms to reduce costs, and stimulates entry of new low-cost firms. To gain
such control over the market, oligopolies often employ strategic methods to be able to
keep hold on their dominant economic interests. Through mutual interdependence,
oligopolists take into account the actions of other firms as they cannot act independently
of each other. Collusion of firms in order to manipulate the price of their products is
often made possible because of this. The excessive influence exhibited by these firms is
enabled by the patrimonial oligarchy. Illicit political collusion between elites project a
systematic problem. Power-sharing among players reveals the ability of oligopolies to
considerably influence the market.

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 Interaction between oligopolists can be illustrated through the application of
game theory and the prisoner’s dilemma. From the analysis, it is apparent that the
decision-making among oligopolistic firms is dependent on other players. The use of a
pay-off matrix represents how behavior of firms can be influenced by others. Collusion
between two parties may result in a large payoff if their arrangement is kept. However,
the table also shows the cost of betrayal if one of the firms decided not to honor the
agreement. In the strategies presented, it is then clear how easily oligopolies can gain
control over the market. In fact, collusion and cheating among players can have an
impact on the economy. Continued influence of these firms show just how vulnerable
the system is. Oligopolistic markets are a threat to the economy especially because it
contributes to market failure. Proliferation of such firms is a symptom of a growing
problem. In the real world, the consequence of a cartelized oligopoly means that it fails
to meet the concept of perfect competition. Due to this, the market power is largely held
by few people. If they deem it so, it is entirely possible for them to raise or lower the
prices of goods and services according to their own preference. Although this may be
the case, it can still be addressed through intervention. In particular, effective
interventionist policies can be introduced in order to curb such practices. In line with
this, it is not enough that the free market is left to its own devices, government
involvement might just be necessary.

Public Policy-based Reforms

In light of all of these, the problems that are brought about by economic failure
can be addressed through policy reforms. Well-crafted policies that targets to minimize
the institutional weaknesses in order to combat corruption is necessary. Oligarchic
corruption in the Philippines has been severely affecting the economy. The far-reaching
implications of enabling such a chronic problem would result in greater suffering for
those who are unequipped to deal with repercussions. This is why overcoming this
issue should be made a priority. In the Philippine context, Quah (2018) has suggested
for political leaders to demonstrate their political will through the establishment of a
Philippine Anti-Corruption Agency (PACA) as a replacement for ineffective anti-
corruption agencies (ACAs). Additionally, Johnston (2010) also suggested that existing
ACAs be consolidated into one. According to him, a single ACA will allow the agency to
maximize its resources and prevent overlapping mandates. This way, they could focus
on unifying their efforts as well as form a coordinated response. In addition, Machlup
(1967) recommended repressive and preventive policies as intervention against
oligopolies and oligopolistic behaviors. The author characterizes repressive policies as
measures against the influence of oligopolists to the market as afforded by their
positions. Meanwhile, preventive policies are those that target the creation or
maintenance of oligopolistic positions. For repressive policies, Machlup suggests two
kinds of interventions: (1) prohibition against bad effects of oligopolistic behavior, (2)
prohibition against the possible bad effects of oligopolistic behavior. For anticipatory
interventions, the author listed: (3) prohibition against actions which actually secure
oligopoly positions, (4) prohibition against actions which potentially help secure said
positions. From the policy reform proposals, it is apparent that government intervention
can take many forms. It may be done through an establishment of an agency that is

11
responsible for corruption investigation, education and prevention. Just the same,
specific policies that aim to repress and prevent corrupt practices would also be
acceptable. No recommendation is deemed too ambitious especially considering how
complex oligopolies are. In the end, all of these policy based reforms would be a great
help in alleviating the issue at hand.

Political Literacy

As previously mentioned, McConell, Brue, and Flynn (2017) emphasized the role of
citizen awareness as a safeguard against the failure of both the market and the state.
More than policies, the people themselves can contribute to the fight against corruption.
Civic engagement is crucial especially as an oversight against abusive practices. In
order to ensure that the public is equipped to handle such challenges, they must be
given access to platforms that would help them accomplish such tasks. At the core of
political literacy is critical thinking. Meanwhile, the formation of sound judgement is
honed through the educational system. With that, it is necessary for the state to lay the
foundation that enables the citizenry to exercise their power in society. Government
sponsored programs, particularly if coordinated through the Department of Education
(DepEd), would expand the scope of its influence. Learning about the institutions and
processes of the political system must be incorporated into the educational curriculum.
The course of Philippine Politics and Governance that is only usually offered to senior
high students must be integrated to the higher education unit. Instead of just offering it
to humanities students, DepEd must reform its curriculum to accommodate more
students. Civic engagement lies in the ability of the citizens to form informed opinions.
The state must encourage the younger generation to acquire basic skills of citizenship.
By shifting focus to the development of political skills of the citizenry, there is hope for a
more active citizenry that could have a stronger influence on the political and economic
landscape of the country.

12
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